Question

Preparing a statement of retained earnings

Kelly May Bakery, Inc. reported a prior-period adjustment in 2018. An accounting error caused net income of prior years to be overstated by \(1,000. Retained Earnings at December 31, 2017, as previously reported, was \)48,000. Net income for 2018 was \(74,000, and dividends declared were \)28,000. Prepare the company’s statement of retained earnings for the year ended December 31, 2018.

Short answer

Retained earnings on December 31,2018 is $95,000

Step-by-step solution

Basic Introduction

The statement of retained earnings is a financial statement that shows the increase or decrease in the amount of retained earnings over particular period.

Statement of Retained Earnings

Statement of Retained Earnings December 31, 2018
Retained earnings on January 1,2018	$48,000
Prior period adjustment	$1,000
Retained earnings as adjusted	$49,000
Net Income	$74,000
	$123,000
Dividend declared	($28,000)
Retained earnings on December 31,2018	$95,000